The scandal at
Newcrest
over selective analyst briefings put the practice in the spotlight almost 12 months ago and prompted the Australian Securities and Investments Commission’s in-depth review of the problem.

The review found that existing guidance offered by ASIC and the ASX is appropriate. This will be good news for companies and advisers worried about another layer of confusing and complex regulation. It also finds that Australia has a pretty good record around disclosure compared with many other countries, which is also true.

However, this does not fix an underlying problem in the market around selective briefings and continuous disclosure. The debate around when companies should reveal takeover approaches highlights just how confused everyone is about the rules.

The scandal at Newcrest over selective analyst briefings prompted the Australian Securities and Investments Commission’s in-depth review of the problem.
Photo: Arsineh Houspian

ASIC is attempting to address a problem that has no easy solution by making sure companies are clear that there are no excuses when it comes to leaking confidential information. It also lays down some ground rules for corporate advisers who may be tempted to leak information.

It is not actually issuing any more formal guidance but will instead focus on whether companies are meeting their commitments and whether it is taking the appropriate enforcement action if they are not.

Six key recommendations

It lists six key recommendations for listed companies, including being vigilant about what information is disclosed at analyst briefings, refraining from trying to manage market expectations through selective briefings, preparing for leaks and having information available to a broad audience via webcasts. There’s also a warning to advisers about being careful when it comes to sounding out the market around capital raisings and other deals.

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ASIC lists three recommendations for analysts, including complying with good practice, not attempting to elicit confidential information and telling their compliance team if they receive market-sensitive information.

There is nothing really concrete in the measures except plans for a targeted review of analyst research reports. A lot of the recommendations are commonsense.

“We will consider the type of information that is available to analysts at the time they make a material change in their forecasts or recommendations," ASIC’s report says. “We will look to ensure that changes in research recommendations are not based on non-public material information that analysts might have received from listed entities prior to any formal announcement."

It promises to continue keeping an eye out for leaks and insider trading and get the right message out to companies about the need for strong systems and controls.

“Overall, we consider that existing guidance issued by ASIC, ASX and industry bodies is largely sound and, in the main, recognised as best practice by the market. The challenge for listed entities, advisers and analysts is to implement the guidance in a consistent manner and approach issues with a view to following the spirit underlying the guidance," the ASIC report said.

Selective briefings, or a whisper in the ear to analysts to massage consensus forecasts, are not unusual, especially in the smaller end of the market. While the legal framework already exists to tackle the problem, gathering evidence is difficult if information is exchanged verbally.

Certainly, many companies have already been treading more carefully since Newcrest was the target of so much attention following allegations it had selectively briefed analysts, so the latest guidelines may not have a significant impact.

It is a fine line for many companies as they want to be able to provide informed analysis without opening up the potential for insider trading.